Reynolds American’s Investors Day

Reynolds American ($RAI) is holding its Investors Day today. Here’s some coverage:

Reynolds American President and CEO Daan Delen said during Investors Day presentations Monday morning that the company is focusing over the long-term on emerging smoke-free products such as snus and its new electronic cigarette Vuse that offer larger margins and greater potential for growth.

“Everything we’re working on from an innovation standpoint has a higher margin than cigarettes,” Delen said. “I think we’re very well positioned in an evolving market.”

Officials with the Winston-Salem-based tobacco company said volumes have risen this year in smoke-free categories such as moist snuff and snus, particularly among younger demographics, while cigarette volumes continue to decline.

But Delen emphasized that cigarettes are still the core focus and business for the tobacco company. He offered an internal mantra of “80/90/90,” which reflects that 80 percent of the company’s resources are still in the combustible tobacco space, 90 percent of its organizational resources focus on that area, and 90 percent of its research and development budget is centered on combustibles.

“That is the category that is still going to deliver a lot of growth in the future,” Delen said, noting that the U.S. tobacco market continues to offer about a $14 billion “profit pool,” about 85 percent of which comes from cigarettes.

But Reynolds American’s strategy on “transforming tobacco” is obvious, as Delen spent substantial time talking about other categories besides cigarettes in promoting the company’s efforts toward innovation.

The shares are down to $40.85 right now. RAI may hit lowest close since June. The dividend now yields 5.8%.

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